Returns At Mobile Appliance (KOSDAQ:087260) Are On The Way Up

What trends should we look for it we want to identify stocks that can multiply in value over the long term? Ideally, a business will show two trends; firstly a growing return on capital employed (ROCE) and secondly, an increasing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Speaking of which, we noticed some great changes in Mobile Appliance's (KOSDAQ:087260) returns on capital, so let's have a look.

Return On Capital Employed (ROCE): What Is It?

If you haven't worked with ROCE before, it measures the 'return' (pre-tax profit) a company generates from capital employed in its business. Analysts use this formula to calculate it for Mobile Appliance:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.013 = ₩616m ÷ (₩81b - ₩33b) (Based on the trailing twelve months to September 2024).

So, Mobile Appliance has an ROCE of 1.3%. Ultimately, that's a low return and it under-performs the Auto Components industry average of 8.2%.

See our latest analysis for Mobile Appliance

Historical performance is a great place to start when researching a stock so above you can see the gauge for Mobile Appliance's ROCE against it's prior returns. If you'd like to look at how Mobile Appliance has performed in the past in other metrics, you can view this free graph of Mobile Appliance's past earnings, revenue and cash flow.

So How Is Mobile Appliance's ROCE Trending?

We're delighted to see that Mobile Appliance is reaping rewards from its investments and is now generating some pre-tax profits. The company was generating losses five years ago, but now it's earning 1.3% which is a sight for sore eyes. And unsurprisingly, like most companies trying to break into the black, Mobile Appliance is utilizing 58% more capital than it was five years ago. This can tell us that the company has plenty of reinvestment opportunities that are able to generate higher returns.

Another thing to note, Mobile Appliance has a high ratio of current liabilities to total assets of 41%. This can bring about some risks because the company is basically operating with a rather large reliance on its suppliers or other sorts of short-term creditors. Ideally we'd like to see this reduce as that would mean fewer obligations bearing risks.

In Conclusion...

In summary, it's great to see that Mobile Appliance has managed to break into profitability and is continuing to reinvest in its business. And since the stock has fallen 22% over the last five years, there might be an opportunity here. So researching this company further and determining whether or not these trends will continue seems justified.

Like most companies, Mobile Appliance does come with some risks, and we've found 3 warning signs that you should be aware of.

While Mobile Appliance may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.